Kuwait Oil Tanker Company SAK and others v UBS AG

The House of Lords held that an application in England for a garnishee (third party debt) order in respect of a debt situated in Switzerland was an act of enforcement falling within article 16(5) of the Lugano Convention and therefore within the exclusive jurisdiction of the courts of the Contracting State in which enforcement is to take place. The court accordingly had to decline jurisdiction under article 19. The court also endorsed the conclusion that, absent the Convention, it would have been inappropriate to make the order because payment under an English garnishee order would not discharge a foreign debt and would expose the garnishee to a real risk of double liability under Swiss law. Section 3A of the Civil Jurisdiction and Judgments Act 1982 (giving effect to the Lugano Convention), article 16(5) and article 19 of the Lugano Convention, and the Rules of the Supreme Court (Order 49) were central to the decision.

This was an appeal from a decision of the Court of Appeal concerning an application by the judgment creditors (Kuwait Oil Tanker Company SAK and others) for a garnishee order against UBS AG in respect of debts said to be due from UBS to the judgment debtor, Mr Qabazard. The original order nisi was made in England under the Rules of the Supreme Court, Order 49, by Tomlinson J; Langley J declined to make the order absolute and discharged it, on grounds including the location of the relevant accounts in Switzerland and the risk to the garnishee of proceedings under Swiss law.

Nature of the application: an application under RSC, Ord 49 (garnishee/third party debt) to attach debts due from UBS to the judgment debtor.

Issues framed:

• Whether the English court had jurisdiction to make the garnishee order given the United Kingdom and Switzerland are parties to the Lugano Convention, specifically in light of article 16(5) (exclusive jurisdiction for proceedings concerned with enforcement) and article 19 (duty to decline jurisdiction where another Contracting State has exclusive jurisdiction).
• Whether, as a matter of discretion and English private international law, it would be proper to make an order which would expose the garnishee to a real risk of double liability because payment under an English order would not discharge a foreign debt.

Reasoning: The House concluded that, for enforcement purposes, the debt was situated in Switzerland and article 16(5) therefore conferred exclusive jurisdiction on the Swiss courts. Article 19 obliged the English court to decline jurisdiction. The court relied on domestic authorities and the jurisprudence and commentary on the Brussels/Lugano conventions showing that enforcement measures are matters for the courts of the place where the assets are located. The Lords further held that even without the Convention the garnishee order should not be made because payment in England would not discharge a debt governed by Swiss law and UBS faced a real risk of being sued in Switzerland, so the exercise of discretion favoured refusal.

The House therefore allowed the appeal and restored the order of Langley J discharging the garnishee order. The decision emphasises limits on cross-border enforcement of judgments where assets or choses in action are situated in another Contracting State and the risk of inconsistent consequences for third parties such as banks.

Appeal allowed. The House held that a garnishee order in England in respect of a debt situate in Switzerland was a proceeding "concerned with the enforcement of judgments" within article 16(5) of the Lugano Convention and that article 19 required the English court to renounce jurisdiction in favour of Switzerland; additionally, even absent the Convention the order should not have been made because payment under an English garnishee order would not discharge the foreign debt and would expose the garnishee to a real risk of double liability.

Order nisi made in England under RSC, Ord 49 (Tomlinson J). Langley J (first instance hearing on the application to make the order absolute) discharged the garnishee order. The Court of Appeal reversed aspects of Langley J's approach and remitted certain matters for further consideration ([2002] EWCA Civ 34). The House of Lords allowed the appeal and restored Langley J's discharge of the order ([2003] UKHL 31).